United States: A QCD Might Help You Meet Charitable Giving And Tax Savings Goals

Last Updated: August 21 2017
Article by Peggy Vyborny

In late 2015, Congress reinstated and made permanent a tax break that allows people age 70˝ and older to transfer up to $100,000 per year tax-free from an IRA to a public charity and apply that amount to their required minimum distributions. This article discusses the advantages of making such qualified charitable distributions (QCDs) and when they might not be appropriate.

If you are age 70˝ or older, have a significant balance in a traditional or Roth IRA and plan to make charitable gifts, consider a qualified charitable distribution (QCD). In December 2015, Congress reinstated and made permanent this tax break. A QCD, also known as a charitable IRA rollover, allows you to transfer up to $100,000 per year tax-free directly from your IRA to a public charity and to apply the transferred funds toward your required minimum distribution (RMD) for the year. However, while IRA rollovers can generate significant tax savings, there are other charitable giving tools that might suit your needs better.

Putting It to Use

A QCD provides tax advantages when a donation of other assets would be wholly or partially nondeductible. This may be the case if you do not itemize or if your total contributions could exceed deduction limits.

Generally, deductions are capped at 50% of your adjusted gross income (AGI) — 30% for donations of appreciated capital assets. Although unused deductions may be carried forward up to five years, these limits reduce the tax benefits of charitable deductions in the current year. In contrast, a QCD is excluded from your taxable income. Essentially, it is the equivalent of an "above-the-line" deduction, so you enjoy the equivalent of a full charitable deduction even if the donation otherwise exceeds AGI limits.

A QCD also may be preferable if your income is high enough to trigger the Pease limitation on itemized deductions. This limitation puts a floor on certain deductions when your AGI exceeds a certain threshold, currently $259,400 for individuals and $311,300 for joint filers. You might consider one if taking an IRA distribution would push you over the income threshold for additional taxes, such as income tax on Social Security benefits or the 3.8% Medicare tax on net investment income.

Taking a Pass

A QCD may not be appropriate if you are in a position to donate appreciated assets, for example, stock or other securities, because they may produce greater tax benefits than a QCD. Take the fictional Elaine, who plans to donate $20,000 to charity in 2016. She is in the 28% tax bracket and must take a $20,000 RMD from her IRA this year. If she uses a QCD to satisfy this requirement, she excludes the $20,000 from her income, saving $5,600 in taxes.

Suppose, instead, that Elaine donates $20,000 in stock that she originally purchased for $5,000. She will have to take the $20,000 RMD, triggering a $5,600 tax. But her charitable deduction for the stock should, assuming her total charitable deductions are less than 30% of her AGI, offset the tax. Plus, Elaine permanently saves the capital gains tax that would be due on the stock, resulting in additional tax savings of $2,250 (15% of the $15,000 gain). The bottom line in this particular example: A QCD could save her $5,600 in taxes, but a stock donation would save her $7,850.

You should definitely think twice before using a QCD to donate IRA funds that would otherwise be tax-free, such as nondeductible contributions to a traditional IRA or nontaxable amounts in a Roth IRA. In most cases, if you itemize, you will be better off taking a tax-free distribution and using the proceeds to make a tax-deductible charitable gift. Because the distribution is tax-free anyway, a QCD provides no income exclusion benefit and it does not qualify for a charitable deduction.

Keep in mind that not all transfers to charity qualify for QCD treatment. Most contributions to public charities, other than supporting organizations, are eligible, but distributions to private nonoperating foundations, donor-advised funds and charitable remainder trusts are not.

Executing Your Strategy

A QCD is invalid if the IRA custodian distributes the funds to you rather than directly to the charity, if you receive something of value from the charity in exchange for your contribution, or if you fail to obtain a proper written acknowledgment of your gift. So if you are considering a QCD, talk to your legal and financial advisors or call us. These advisors can help ensure that you execute a valid transaction in a way that is appropriate for your specific situation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Peggy Vyborny
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.